Class Notes

Class Info

Key Points

• The demand curve slopes downward because lower prices increase the quantity demanded
• The supply curve slopes upward because higher prices increase the quantity supplied
• The point where supply and demand meet is the "equilibrium price"
• Above equilibrium there is a surplus; below it there is a shortage

Term Notes

• Equilibrium price: the price at which quantity demanded equals quantity supplied
• Excess supply: when the price is too high and goods go unsold
• Excess demand: when the price is too low and goods run short

Open Questions

• When does the demand curve itself shift? → Will be covered next time under "shifts in demand"
• Does a real market actually reach equilibrium quickly? Worth looking into

Review Tasks

• Reread textbook pp. 80–92
• Work through practice problems 5-1 to 5-4
• Be able to explain how to find the equilibrium price in my own words

One-Line Summary

Price is set by the balance between "how much people want" and "how much can be made." It's easier to grasp when you draw the graph.